When private costs differ from social costs,leading to a Tragedy of the Commons,which of the following must be present
A)excludable resources
B)a negative externality
C)a positive externality
D)poor profit incentive to capitalize on the resource

Question

Quizplus · Accepted Answer

The Tragedy of the Commons occurs when individuals or firms pursuing their own self-interest consume a common resource, leading to overuse and depletion of the resource. This typically arises when there is a negative externality, which means that the private cost of using the resource differs from the social cost. In other words, the users of the resource do not bear the full cost of their actions, which leads to overuse of the resource which negatively affects others. Excludability, positive externality, and profit incentives are not necessary conditions for the Tragedy of the Commons to occur.

When Private Costs Differ from Social Costs,leading to a Tragedy